Download INTOSAI Public Debt Working Group Mexico Meeting 2010

INTOSAI Public Debt Working Group
Mexico Meeting 2010
Impact of Financial Crises on
Public Debt and
INTOSAI Initiatives
Jose Oyola, Ph.D., CPA
Government Accountability Office (GAO)
([email protected], [email protected] )
1
Impact of Crisis on Public Debt
• Public debt levels increased to 50-year highs
in major advanced countries
• Weak economic growth prospects have
increased the risk of continuing budget
deficits and higher public debt levels in the
future
2
General Government Gross Debt, 2006 and 2009, Maastricht Debt Definition
Italy
106.5
Greece
Belgium
88.1
Hungary
64.7
76.8
67.6 73.2
63.7 69.1
Germany
Malta
United Kingdom
68.1
43.5
62.2 66.5
64.0
Austria
Ireland
24.9
Netherlands
2009
60.9
47.4
Spain
53.2
39.6
56.2
Cyprus
64.6
2006
47.751.0
Poland
39.7 44.0
42.345.7
Finland
Sweden
Denmark
41.6
32.1
Latvia
36.1
10.7
Slovenia
26.7
35.9
30.5 35.7
29.4 35.4
Slovakia
Czech Republic
Lithuania
29.3
18.0
Romania
Bulgaria
12.4
14.8
Luxembourg
14.5
0.0
77.6
63.7
Portugal
115.1
78.3
65.6
France
97.8
96.7
115.8
6.5
23.7
22.7
30.0
60.0
90.0
3 120.0
U.S. Debt Held by the Public, $Trillion and Debt/GDP Ratio, 2004 - 2015
$16
80%
69%
$14
Debt held by the
public (US$ trillion)
71%
72%
72%
73%
70%
64%
$12
60%
Debt held by the
public / GDP
53%
$10
50%
40%
$8
37%
37%
37%
40%
36%
$6
$10.5
$11.5
$12.3
$13.1
$14.0
30%
$9.3
$4
$2
20%
$7.5
$4.3
$4.6
$4.8
$5.0
$5.8
10%
$0
0%
‘04
‘05
‘06
‘07
‘08
‘09
‘10 est ‘11 est ‘12 est ‘13 est ‘14 est ‘15 est
4
New Challenges for Policymakers, Debt
Managers and Auditors
• Risk of higher interest payments
• Unsustainable public debt levels can happen
sooner
• Debt managers face higher scrutiny from
capital markets
• Reporting and auditing on fiscal risks and
public debt matters have become more
challenging
5
U.S. Net Interest Payments
as a Percentage of Total Revenues, 1990 to 2020
Pe rce nt
25%
Ac tua l
Projec tions
20%
15%
10%
5%
So urce: GAO Analys is o f CBO d ata
Fiscal Ye ar
20
20
18
20
16
20
14
20
12
20
10
20
08
20
06
20
04
20
02
20
00
20
98
19
96
19
94
19
92
19
19
90
0%
6
U.S. Debt Held by the Public
Under Two Fiscal Policy Simulations
Alternative
Baseline
Extended
Historical High
109 percent in 1946
Source: GAO.
Note: Data are from GAO’s January 2010 analysis based on the Trustees’ assumptions for Social Security and Medicare. Some of the
increase in debt has been used to purchase financial assets as part of programs to stabilize financial markets and stimulate the
economy. The value of these financial assets has not been subtracted from the total debt held by public in our simulations.
7
IMF Estimates of Debt Vulnerability Indicators, Percent of Gross Domestic Product
Country
Gross
General
Governm
ent Debt,
FY’10(p)
Net General
Government
Debt, FY’10 (p)
General Government
Securities with less
than One Year
Remaining Maturity
General
Government
Debt Held
Abroad
Australia
19.8
5.4
3.9
4.3
Austria
70.7
60.5
6.1
58.5
Belgium
100.1
91.1
22.6
65.0
Canada
82.3
31.8
14.1
14.1
France
84.2
74.5
17.2
48.7
Germany
76.7
68.6
15.8
40.3
Greece
124.1
104.3
15.9
99.0
Italy
118.6
116.0
24.5
56.4
Japan
227.3
121.7
48.7
13.7
Korea
33.3
n.a.
3.2
3.0
Norway
53.6
-153.6
12.1
27.5
Portugal
85.9
81.6
13.0
60.2
Spain
66.9
57.5
12.4
26.9
Sweden
43.1
-16.2
4.2
19.3
United Kingdom
78.2
71.6
6.6
17.9
United States
92.6
66.2
17.9
24.7
8
IMF Estimates of Gross Financing Needs in 2010,
Percent of GDP, Selected Countries
9
Challenges of reporting and auditing
fiscal risks and public debt
• Obtaining the Legal Mandate
• Central banks and special-purpose vehicles are used to
provide support to financial entities (legal authority to audit
these entities may be questioned)
• Valuation, reporting and managing challenges:
– Governments acquired majority stakes in major financial entities
(e.g. Northern Rock, GSEs, AIG)
– Government purchased risky financial assets in distressed markets
(e.g. Mortgage-backed securities)
– Governments expanded the amount and scope of guarantees to
investors and bank depositors (e.g. deposit insurance, money
market funds)
– Governments face unlimited exposure to systemic risks (highlyinterconnected large firms)
10
INTOSAI Initiatives
• Task Force on Global Financial Crisis
– www.intosaijournal.org
• IDI Transregional Program on Public Debt
Management Audit
– www.idi.no
• Individual SAIs audit efforts
– www.gao.gov
– www.nao.org.uk
11
Potential Audit Areas
• Public debt management
• Financial audit of public debt
• Long-term fiscal commitments and debt
sustainability
• Enhancing accountability and transparency of
financial support to distressed entities
• Strategies for managing and divesting assets
• Reviews of funds provided for economic
recovery and stabilization
12